Correlation Between Williams Sonoma and Dicks Sporting

Can any of the company-specific risk be diversified away by investing in both Williams Sonoma and Dicks Sporting at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Williams Sonoma and Dicks Sporting into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Williams Sonoma and Dicks Sporting Goods, you can compare the effects of market volatilities on Williams Sonoma and Dicks Sporting and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Williams Sonoma with a short position of Dicks Sporting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Williams Sonoma and Dicks Sporting.

Diversification Opportunities for Williams Sonoma and Dicks Sporting

0.85

Correlation Coefficient

Williams Sonoma  Dicks Sporting

Very poor diversification

The 3 months correlation between Williams and Dicks is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Williams Sonoma and Dicks Sporting Goods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dicks Sporting Goods and Williams Sonoma is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Williams Sonoma are associated (or correlated) with Dicks Sporting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dicks Sporting Goods has no effect on the direction of Williams Sonoma i.e., Williams Sonoma and Dicks Sporting go up and down completely randomly.

Pair Corralation between Williams Sonoma and Dicks Sporting

Considering the 90-day investment horizon Williams Sonoma is expected to generate 1.32 times more return on investment than Dicks Sporting. However, Williams Sonoma is 1.32 times more volatile than Dicks Sporting Goods. It trades about -0.15 of its potential returns per unit of risk. Dicks Sporting Goods is currently generating about -0.31 per unit of risk. If you would invest  21,164  in Williams Sonoma on November 28, 2024 and sell it today you would lose (1,528) from holding Williams Sonoma or give up 7.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Williams Sonoma  vs.  Dicks Sporting Goods

Williams Sonoma

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Williams Sonoma are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Williams Sonoma displayed solid returns over the last few months and may actually be approaching a breakup point.

Dicks Sporting Goods

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dicks Sporting Goods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, Dicks Sporting may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Williams Sonoma and Dicks Sporting

The main advantage of trading using opposite Williams Sonoma and Dicks Sporting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Williams Sonoma position performs unexpectedly, Dicks Sporting can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dicks Sporting will offset losses from the drop in Dicks Sporting's long position.

The idea behind Williams Sonoma and Dicks Sporting Goods pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.